Why delaying climate action is bad for business

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Sometimes what seems so sensible in the short term can with hindsight be a source of great regret. This is how it will be seen if efforts by some in the business community to delay or water down the proposed pricing of carbon in Australia and the USA are successful.

It is bad for business because not only has “change come to America”, it is coming to the world. We live a globalised economy, as we’re being reminded brutally right now. So whether you like it or not, whether you accept the justification or not, we are going to shift the economy to a low carbon one. This means business leaders that are resisting the process (and remember this is not all or even most) are resisting change that is inevitable and healthy, even if difficult right now.

Of course people resist change, as companies affected by the decline of protectionism resisted change. It is understandable, but it is not OK, either for those businesses or for the broader economy. If change is inevitable and in the greater good, then it is always better to guide it intelligently and early, than to wait for the crisis that forces it to be rapid and brutal.

I don’t argue it is somehow surprising that some companies are behaving as they are – I accept how markets work. I just note that self-interest, which is what drives markets, will always resist change. Good or bad economic times are not relevant to that behaviour. Sure, it would have been great if the economy was booming when we did this, but it’s not – and delay will make the economic impact later much harsher. Then there will be some other excuse – the recovery will be delicate, or the new boom needs to carry on for a while to build reserves again, or whatever. Resistance will be with us still.

So now is the time we need to apply a bit of tough love to the business community. If countries have industries that can’t survive with a low carbon price, then they’re not going to survive later with a high one either. Protectionism doesn’t work.

And if you need a self-interest argument to proceed, then for Australian companies, think about the political context. Delay is bad political strategy for the business community. This government has bent over backwards, I think too far, to compensate business for the change. A business friend of mine in the US, facing an Obama administration, wrote to me the other day and asked “don’t your guys get it? What more do they want? To be paid to pollute more?”

The proposed Australian emissions trading scheme is as good a deal as business will get. It is easy to imagine a future government, when the icecaps have melted, the cyclones are hitting and the fires are burning, imposing a much tougher regime than the one currently on the table. The proposed Australian scheme is a bad deal for the climate but it’s a great deal for business. My advice would be take it and run or you’ll rue the day you didn’t.

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